Families who have paid their water bills will get no refund, even if the charges are abolished as part of a deal to keep Fine Gael in power.
Fianna Fáil has indicated the scrapping of water charges will be a red-line issue if it is to support a minority government headed by Enda Kenny.
But it could be months before any such deal is agreed, and the uncertainty is now expected to result in a massive drop-off in the number of households paying their bills.
However, an EU report warns that if charges are abolished, Irish Water will not come off the State's balance sheet - and this will therefore reduce the money available for spending increases and tax cuts in future Budgets.
Fianna Fáil's environment spokesman Barry Cowen confirmed to the Irish Independent that while an ending to charging was an "imperative" for his party, the party would not seek to give refunds.
"We can't change the law retrospectively, as much as we'd wish. We were not in government so we couldn't stop this fiasco, as much as we tried," he said.
Asked about the likelihood that there would be widespread boycotting of charges until the situation is resolved, Mr Cowen said: "The Government has created this mess and has to bring it to a conclusion, or somebody else will."
Last night, outgoing Agriculture Minister Simon Coveney indicated Fine Gael's willingness to move on water charges.
Speaking on RTÉ's 'Prime Time' in a clear bid to woo Fianna Fáil, Mr Coveney said Fine Gael would "certainly be willing to talk about water".
"We need to take on board, within reason, what they are looking for," he added.
Fine Gael sources admitted Irish Water was "an unmitigated disaster" and that "no effort was made to sell it properly".
A number of TDs accepted that something would have to change, but warned they had invested too much political capital to scrap Irish Water completely. The company has completed three billing cycles and is in the process of issuing a new round of invoices.
Dermott Jewell of the Consumers' Association of Ireland said there would be a "very, very sharp" decline in payment rates as a result of the political upheaval. "At the very least, people will hang back rather than put more money into a bottomless pit," he said.
He added that in the event charges are dropped, those who had paid to date "should not be seen as another fallout from this unusual situation".
Abolished
Former Labour Party minister Pat Rabbitte yesterday told Independent.ie'sontbench' podcast that "some day, what happened at Cabinet on that issue will come out, no doubt".
"It is remarkable that if there are two people living in a house and they get a water bill for €160 and they get a grant from the Department of Social Protection for €100, that after all we have suffered in the last eight years, that €60 on water is the cause of contention. But it was the straw that broke the camel's back," he said.
Former Fine Gael justice minister Nora Owen said her party would struggle to justify dropping charges without also giving a refund.
She said most Fine Gael voters were likely to have paid their charges - but would be annoyed if they were abolished without a refund "because the bloody neighbour down the road with two cars was boasting that they were not going to pay it".
Green Party leader Eamon Ryan said nobody was looking to maintain the status quo in relation to Irish Water.
His party wants to change the utility from being a commercial semi-state into a national authority.
The European Commission Post-Programme Surveillance Report Ireland for autumn 2015, which was released yesterday, said it was important to ensure funding for Irish Water's capital plan beyond 2016 "in order to address critical weaknesses in water infrastructure".
Irish Independent
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